Cash cattle prices, reaching the lowest level since 2012 this week, have dropped about $62/cwt in 23 months, the largest 2-year consecutive decline since the 1970s on a percentage basis. Live cattle futures have dropped almost $70 or 40.7% in the same time frame, just shy of the 1970s debacle. Of course there was a commodity price freeze in June 1973 that started that mess, so again, this break in cattle prices stands alone for its magnitude and its lack of an external market-moving event.

We will never know until looking back, what role all of the changes occurring in the cattle and futures businesses have played in this reality and what had the biggest detrimental impact. No doubt discussions and arguments will continue on this subject for years to come. Whether to blame the shift to computerized futures trading and the rise of the algo-trader or the increase in committed cattle ownership of the packer- or both. Then there’s always the tidal wave of imported beef, cheap pork and poultry to point out. Not to mention the closing of fed cattle slaughter plants removing 90,000 head of capacity from the industry.

One thing can be agreed upon; live cattle futures are pricing the expansion of the beef cowherd as if next year’s calves were on the ground and already weaned. Maybe the market needs to over compensate on the downside for the expansion before the market can bottom, but the problem is no one knows how cheap overdoing it is. At least not today.

This week traders and analysts have begun to talk more frequently about fed cattle prices ultimately dropping into the $90s and even $80s before a real bottom is found. A subject merely whispered about a few months ago is being discussed more openly, the “if” being replaced with “when”. The implications of these price levels is not lost on anyone on the cattle production or banking side.

When cattle prices bottomed in 1975, fed cattle were premium to feeders by $8. With the impending supply increase in feeder cattle insured for 2017 and sub-$100 prices reflected in Q3 and Q4 2017 live cattle futures prices, it remains a marvel and a concern that feeders still remain stubbornly premium to fats. Feeders are still holding their 2013 spot low. Looking back at any major long term cattle market bottom in history, feeder cattle prices, relative to fats, have ultimately had their comeuppance. The question for this time in history is when not if.